Appeals allowed due to invalid notice, full disclosure, and eligibility for exemption.

The Tribunal allowed the appeals by the assessee, holding that the notice under section 148 was not legally valid as it was issued beyond the permissible period, the non-service of notice under section 143(2) did not render the assessment invalid, the assessee had made a full and true disclosure of all material facts, the Noida Unit was eligible for exemption under section 10A, and the Assessing Officer had adhered to the proper procedure.

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Issues Involved:

1. Validity of notice under section 148 of the Income Tax Act.
2. Non-service of notice under section 143(2).
3. Full and true disclosure of material facts by the assessee.
4. Eligibility for exemption under section 10A.
5. Adherence to proper procedure by the Assessing Officer (AO).

Issue-wise Detailed Analysis:

1. Validity of Notice under Section 148:

The assessee argued that the notice under section 148 was invalid as it was issued after four years from the end of the relevant assessment year without any failure on their part to disclose fully and truly all material facts. The Tribunal found that the assessee had made a full and true disclosure of all material facts necessary for the assessment, including the transfer of machinery from the Delhi Unit to the Noida Unit and the non-use of the machinery prior to the transfer. The Tribunal concluded that the notice under section 148 was not legally valid as it was issued beyond the permissible period of four years.

2. Non-service of Notice under Section 143(2):

The assessee contended that the assessment was invalid due to the non-service of notice under section 143(2). The Tribunal found that there was substantial compliance with the provisions of section 143(2) as the assessee was given a copy of the order sheet entry recording reasons under section 148(2) and was requested to furnish justification for its claim under section 10A. The Tribunal held that the non-service of notice under section 143(2) did not render the assessment invalid.

3. Full and True Disclosure of Material Facts:

The Tribunal examined whether the assessee had disclosed all material facts fully and truly. It was found that the assessee had disclosed the transfer of machinery and its non-use prior to the transfer in the balance-sheet and audit report. The Tribunal held that the disclosure was full and true, and the Revenue could have verified the claim during the original assessment proceedings. Therefore, the Tribunal concluded that the assessee had made a proper disclosure in terms of the first proviso to section 147.

4. Eligibility for Exemption under Section 10A:

The Tribunal considered whether the Noida Unit was eligible for exemption under section 10A. The Revenue's case was based on the presumption that the machinery transferred from the Delhi Unit was used machinery. However, the Tribunal found that the assessee had continuously maintained that the machinery was not used prior to its transfer and was used for the first time at the Noida Unit. The Tribunal held that the Revenue did not bring any evidence to rebut the assessee's claim and that the assessee was eligible for exemption under section 10A.

5. Adherence to Proper Procedure by the Assessing Officer (AO):

The assessee claimed that the AO did not dispose of its preliminary objections to the notice under section 148, rendering the assessment under section 147 invalid. The Tribunal found that the AO had complied with the procedure by issuing the notice under section 148 and providing the reasons recorded to the assessee. The Tribunal held that the AO's actions were in accordance with the law and did not invalidate the assessment.

Conclusion:

The Tribunal allowed the appeals by the assessee, holding that the notice under section 148 was not legally valid, the non-service of notice under section 143(2) did not render the assessment invalid, the assessee had made a full and true disclosure of all material facts, the Noida Unit was eligible for exemption under section 10A, and the AO had adhered to the proper procedure.

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